Global Supply Chain Strategy

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In the competitive global environment firms realize the importance of integrated relationships with their suppliers and customers. This makes the supply chain strategy a major issue as it enhances competitiveness by reducing uncertainties and enhancing customer service. Information technology synchronized with supply chain has integrated planning and coordination. Technology has enhanced communication in supply chain but it is not free from risks and pitfalls. It can also give rise to unfair trade practices. This paper provides an awareness of the concepts and principles underlying the supply chain management and how businesses have benefited from its application.

Supply chain represents the sequence of processes and activities involved in the complete manufacturing and distribution cycle of any product.  The process includes designing, procurement, manufacturing, and finally distribution to the point of sale.  Chalasani & Sounderpandian (2004) describe supply chain as a network of collaborating partners who collectively engage in activities such as procurement and transformation of materials into products, and distribution of products to customers. Kaufman describes supply chain management as to … “remove communication barriers and eliminate redundancies through coordinating, monitoring and controlling processes” (Kaufman cited by Power, 2005). According to Handfield and Nichols (Cited by Power), three major forces drive towards an integrated approach to the effective supply chain management – the information revolution, increased levels of global competition creating a more demanding customer along with demand driven markets, and the emergence of new types of inter-organizational relationships. Due to increase levels of outsourcing, competitive pressures, increasing globalization, and increasing importance of e-commerce, supply chains gained complexity (Kathawala & Abdou, 2003). When companies perceived the benefits of collaborative relationships, the concept of supply chain management emerged (Lummus & Vokurka, 1999).

Supply chain strategy is meant to match the demand to supply which enhances customer satisfaction and drives down costs. This necessitates that uncertainties within the supply chain have to be reduced to the minimum but this may be difficult at times depending upon the type of product involved (Christopher & Towill, 2001). For example if a product is fashionable or in the fashion industry where the demand is constantly changing, because of its intrinsic nature, demand in unpredictable. This requires a strategy which could match the demand and supply. Lee (2002) contends that successful companies understand that the right supply chain strategy is dependent on certain factors. A product with a stable demand and a reliable source of supply should not be managed the same way as one with highly unpredictable demand and an unreliable source of supply. The internet can also be a powerful tool for supporting supply chain strategies with different demands and supply uncertainties.

To cater to the changing demands of the customers, some manufacturers take care of management of supply and distribution in addition to designing.  Zara is one such Spanish clothing company, which has retained direct control over the entire process.  Zara has been able to match the demand and supply in the highly volatile market. It uses proprietary information system to connect its stores to its headquarters. Zara employs specially designed hand-held devices or PDAs to keep track of the total order fulfillment process – plan procurement and production requirements, monitor warehouse inventories, allocate production to various factories and other suppliers, keep track of shortages and oversupplies (Ferdows et al., n.d.).

Hoffman et al., (2002), describe three types of market place, namely the Public e-markets, the consortia, and the private exchanges. In the public e-markets, many buyers and sellers converge at one point and it is open to public. Only equity holders and select trading partners have access to the consortia while the private exchanges like Wal-Mart and Dell computers are privately owned and can be accessed only through invitation. Here the focus is on the process rather than the price and is based on information exchange.

Dow Chemical started its private exchange with 200 customers in 1999 and by the end of 2001, they had 8000 customers spread across 35 countries (Hoffman et al.,). The customers benefit through this exchange as they can view their purchase histories, plan their future orders and check availability of products. The suppliers, on their part, get a clear picture of the buying habits of the customers and this helps them to forecast demand, control inventory, schedule manufacturing. The exchange can track all interactions with the customers and the company’s cost per transaction reportedly came down to $1 from about $50.

An effectively planned and managed supply chain strategy can impact the global organic coffee industry. According to FIBL and Naturland (2002), the global retail value of organic coffee was approximately USD223 million (cited by Claro & Claro).  Besides, there was a 20% steady and annual growth in this industry. Organic food was very popular in Europe and particularly in Netherlands. In fact, in Europe, organic coffee accounted for 0.5 per cent of total coffee sales. Organic coffee was readily available in supermarkets and other outlets in Netherlands. Claro & Claro identified five issues, which needed collaborative efforts and co-ordination. Consumers were willing to pay premium for quality org………………………………………………………………………..

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